Overview of Taxes for Independent Contractors

NOTE: Swing Education and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Table of Contents

You will find the following information in this article:

  • What is this document all about?
  • Where can I go for support to make sure I do this right?
  • What’s the deal with having no taxes withheld from my pay?
  • Do quarterly taxes apply to you?
  • How do I pay quarterly/yearly taxes?
  • I’d rather just pay my taxes at the end of the year, is that a problem?
  • I need your EIN (employment identification) number
  • Helpful Links

What is this document all about?

As a Swing Sub, you are an independent contractor, rather than a direct employee, which means there are some significant differences in how you are expected to organize, track, and report your taxable income to the IRS.  This document is intended to make you aware of some of these differences and equip you with resources that can help you estimate and manage taxes due on the money you earned working at Swing Education’s partner schools.

Where can I go for support to make sure I do this right?

There is a great option for many SwingSubs to get FREE support on Tax preparation!  The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less and need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.

This Flyer created by the IRS outlines the VITA program.  To locate the nearest VITA site near you, use the VITA Locator Tool or call 800-906-9887.

If you do not qualify for the VITA program and still have concerns about doing your quarterly or annual taxes properly we recommend you contact an online or local tax professional that can give guidance more specific to your individual needs.  Here are some tips for choosing a tax return preparer.

What’s the deal with having no taxes withheld from my pay?

When you begin earning money as an independent contractor, you essentially become a business-of-one.  Because you are a self-employed individual this means you are paid the full amount listed on the assignments you worked and no taxes are withheld.  

Unfortunately, this does not remove your tax burden, rather, it means you are required to report your income and resolve your tax debt directly with the IRS.  Just how a company will withhold money from an employee's paycheck to send to the IRS, you need to take out your own taxes from the money you earn. Generally, as a self-employed individual, you are required to file an annual return and pay estimated tax quarterly.  More about this below.

Do quarterly taxes apply to you?

Many SwingSubs earn enough to be expected to pay quarterly taxes. Here’s a general rule-of-thumb for determining if you should be paying taxes quarterly:

If you expect to owe more than $1,000 in taxes for the year for your contracting work (which amounts to around $3,000 or more in earnings) then you may need to pay quarterly taxes by the dates listed below.

Here is a link with the 2018 deadlines: https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2

How do I pay quarterly/yearly taxes?

Paying quarterly taxes is done by submitting (by mail or electronically) the 1040-ES (for quarterly taxes) and Schedule C Form (for year-end taxes) to the IRS.  It is HIGHLY ENCOURAGED that you read the instructions on the 1040-ES form closely as it has detailed information on tax rates, estimating your quarterly taxes, how to pay, etc.

Swing is required to send you a 1099-Misc form by January 31st which you will use to report your taxes from the previous year and fill out your Schedule C.

I’d rather just pay my taxes at the end of the year, is that a problem?

If you don’t pay quarterly when you should, you could face a penalty. Typically, you’ll pay a 6-8% penalty on the amount you underpaid. So if you made $10,000, owe $2,000 in taxes, and didn’t pay quarterly taxes, you might be subject to a penalty of 6% of the $2,000 underpayment, which is $120 -- yikes!  In short, it is highly recommended that you pay your taxes quarterly if you expect to owe $1000 or more.

What is Swing's EIN (employment identification) number:

Our EIN number is: 47-4349654. If you receive a 1099 from us, this is also included on that form.

Helpful Links:

NOTE: Swing Education and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

 

 

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